Sam’s Club Axes 11K Jobs - Update

Published on January 25, 2010 | Comments: 0
Discount retailer Wal-Mart is laying off about 11,200 store-level Sam’s Club employees. Wal-Mart notified employees scheduled for termination on Sunday, January 24, 2010. According to the New York Times, the job cuts consist of 1,200 membership recruiting positions (approximately two associates at each of Sam’s Club’s roughly 600 stores), and 10,000 product demonstrators. Reportedly Wal-Mart said the layoffs were not spurred by effects of the economic recession. Sam’s Club will outsource product demonstration to Shopper Events, an Arkansas marketing firm which specializes in performing product demonstrations for food and CPG brands in Wal-Mart stores. Laid off product demonstrators will be able to apply for jobs with Shopper Events, which reportedly plans to hire about 10,000 new employees. Sam’s Club also intends to focus membership recruitment more on in-store promotions with suppliers.

Wal-Mart Closes 10 Sam’s Club Stores

In addition to laying off more than 11,000 Sam's Club employees, Wal-Mart will close 10 underperforming locations of its Sam’s Club discount warehouse club subsidiary. Unlike the layoffs, Wal-Mart says the store closures are an economic decision. In an open letter on the Wal-Mart corporate web site, Sam’s Club President/CEO Brian Cornell said the stores are losing money and the decision is “part of the company's strategy to leverage expenses and drive member value.” Approximately 1,500 employees will be affected by the store closings. Wal-Mart says it will offer severance and benefits for eligible employees and also try to find laid-off employees jobs at other Sam’s Club or Wal-Mart stores and hold job fairs at locations being shut down.
Brian Cornell
The 10 stores slated for closure are located in Phoenix, AZ, Irvine, La Quinta, Sacramento and Vista, CA, Louisville, CO, Nampa, ID; Rolling Meadows, IL, Clay, NY La Quinta, CA; Louisville, CO; Vista, CA; Rolling Meadows, IL; Clay, NY; and Houston, TX. According to Wal-Mart, the store closures are part of a larger strategy that includes the addition of six new Sam’s Club stores and 52 store remodels by the end of fiscal 2010 on January 31, 2010. In fiscal 2011, Wal-Mart plans to add between five and 10 new, expanded or relocated stores and remodel between 60 and 80 stores.

Sam’s Club Has Shaky Q3

Wal-Mart is closing the select Sam’s Club stores following some shaky Q3 fiscal 2010 performance by Sam’s Club, which reported a 0.7% decline in net sales, which dropped from $11.64 billion to $11.55 billion. In contrast, net sales at Wal-Mart’s U.S. segment 1.2%, from $61 billion to $61.8 billion, and international net sales rose 1.6%, from $24.9 billion to $25.3 billion. In addition, Sam’s Club reported a quarterly same-store sales drop of 1.9% including fuel, compared to a 6.3% hike a year earlier. Without fuel, Sam’s Club reported a 0.1% comparable store sales increase, compared to a 4.1% increase in Q3 2009. In Q4 2010, Wal-Mart expects comparable store sales at its Wal-Mart and Sam’s Club banners to remain flat, minus or plus 1 percent.

Costco Plans Significant Store Openings

In contrast to Sam’s Club’s store closings and modest plans for new store openings in the near future, rival discount warehouse club retailer Costco is planning a major store opening campaign during the next five years. Costco, which reported a 2% improvement in same-store sales during December 2009, expects to open 15-20 stores during its current fiscal year 2010, which ends in August 2010. In addition, Costco plans to open as many as 20 stores per year during its fiscal years 2011 and 2012, and up to 25 stores per year during its fiscal years 2013 and 2014. Most stores will open in the U.S., but Costco is also considering adding to existing stores operating in Japan, Taiwan, Korea and Australia. Costco did shutter its two specialty Costco Home home furnishings stores in July 2009, citing the current economic slowdown and weakness in the home furnishings business as prompting the closures.

Target Pilots Discount Warehouse Club Promotion

Wal-Mart’s chief discount rival, Target Corporation, is currently running a sales promotion, called “The Great Save,” that offers items including bulk-packaged CPG and grocery goods, as well as designer apparel and home décor products usually not available at Target, in what Target calls a “warehouse club-like setting.” Customers will not need to pay a membership fee or get an ID card to participate in the promotion, which ends Sunday, February 21, 2010. Target will offer The Great Save in approximately 1,000 of its 1,740 U.S. stores, and some items will also be available online.

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